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Red Robin (RRGB) Shares Up on Q4 Earnings & Revenue Beat

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Red Robin (RRGB) Shares Up on Q4 Earnings & Revenue Beat

Solid company-owned restaurants comps and guest traffic along with higher margins help Red Robin Gourmet Burgers (RRGB) post better-than-expected results in the fourth quarter.

Shares of Red Robin Gourmet Burgers Inc. RRGB gained 2.3% in after-hours trading on Feb 22, after the company reported better-than-expected results in the fourth quarter of 2017.

Earnings & Revenue Discussion

Red Robin’s adjusted earnings of 78 cents per share surpassed the Zacks Consensus Estimate of 55 cents by 41.8% and jumped a significant 122.9% year over year.

Revenues of $342.4 million beat the Zacks Consensus Estimate of $331 million by more than 3.4% and increased 17.5% from the prior-year quarter. This improvement was driven primarily by new restaurant openings.

Behind the Headline Numbers

Comps at company-owned restaurants increased 2.7% year over year, against the prior-quarter comps decrease of 0.1%. The upside was led by 0.8% growth in average guest check and 1.9% increase in guest counts. Notably, the increase in average guest check comprised a 2.6% increase in pricing, partly offset by 1.8% drop in menu mix. Red Robin outperformed the casual dining industry on guest traffic for the sixth consecutive quarter.

Restaurant-level operating profit margin expanded 70 basis points (bps) to 20.5% due to a 100-bps decrease in labor costs, 50-bps drop in other restaurant operating expenses and 20-bps fall in occupancy costs. The improvement was partly offset by a 90-bps increase in cost of sales.

Adjusted earnings before interest, taxes, and amortization (EBITDA) increased 22.8% to $35.8 million from $29.2 million in the year-ago quarter.

2017 Highlights

Revenues came in at $1.4 billion, up 6.5% from 2016 level. Company-owned restaurants comps grew 0.6% and comparable-restaurant guest counts increased 0.4%.

However, adjusted earnings declined to $2.49 per share from $2.78 a year ago.

Financial Highlights

Red Robin had cash and cash equivalents of $17.7 million as of Dec 31, 2017, compared with $11.7 million as of Dec 25, 2016. The company’s long-term debt amounted to $266.4 million as of Dec 31, 2017, against $336.4 million at the end of 2016 (as of Dec 25, 2016).

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise

 

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise | Red Robin Gourmet Burgers, Inc. Quote

 

First-Quarter 2018 View

Earnings per share are estimated between 60 cents and 80 cents. This reflects the loss of one high volume revenue week as compared with a year ago. Meanwhile, the Zacks Consensus Estimate of $1.12 is much higher than the guided range.

2018 View

Red Robin anticipates earnings in the band of $2.40-$2.80 per share, reflecting 14-33% year over year growth (after adjusting 2017 for the 53rd week). The Zacks Consensus Estimate for 2018 is pegged at $2.72.

Red Robin projects comparable-restaurant sales growth of 50-150 bps. Operating weeks are expected to decline 1% as 2018 will have 52 weeks compared with 53 weeks in 2017. Total revenues are expected between a decline of 50 bps and an increase of 50 bps in 2018.

Cost of sales, as a percentage of restaurant revenues, is projected to be up 50-100 bps.

Restaurant labor costs, as a percentage of restaurant revenues, are expected to range between an increase of 25 bps and a decrease of 25 bps.

Red Robin has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

The Cheesecake Factory Inc.’s CAKE fourth-quarter 2017 earnings met analysts’ expectations, while revenues surpassed the same. A challenging operating environment in the U.S. restaurants space has been affecting the company’s performance.

McDonald's MCD reported fourth-quarter 2017 adjusted earnings per share of $1.71, beating the consensus mark of $1.59 by 7.5%. The bottom line also improved 19% from the year-ago quarter (16% in constant currency). The upside reflects strong operating performance and G&A savings.

Chipotle Mexican Grill CMG posted mixed fourth-quarter 2017 results, with adjusted earnings of $1.34 per share surpassing the consensus estimate of $1.32 by 1.5%. The bottom line also grew 143.6% year over year on lower costs and higher revenues.

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